CAGR
%
Absolute gain
₹
Total growth
100.0%
Worked Examples
See how CAGR is calculated for different investment scenarios using the site's formula.
Example 1: Mutual Fund Investment (Find CAGR)
Scenario: You invested ₹1,00,000 in a mutual fund in Jan 2019. It grew to ₹2,00,000 by Jan 2024 (5 years).
• Starting value = ₹1,00,000
• Ending value = ₹2,00,000
• Time period = 5 years
Calculation:
CAGR = (₹2,00,000 / ₹1,00,000)^(1/5) − 1
CAGR = (2)^0.2 − 1
CAGR = 1.1487 − 1 = 0.1487 = 14.87%
Your investment doubled at a CAGR of 14.87% per year.
Example 2: Calculate Future Value
Scenario: You have ₹5,00,000 today. How much will it grow in 10 years at 12% CAGR?
• Starting value = ₹5,00,000
• Expected CAGR = 12% p.a.
• Time period = 10 years
Future value = ₹5,00,000 × (1 + 0.12)^10
Future value = ₹5,00,000 × (1.12)^10
Future value = ₹5,00,000 × 3.1058 = ₹15,52,924
Absolute gain = ₹15,52,924 - ₹5,00,000 = ₹10,52,924
Example 3: Calculate Required Starting Amount
Scenario: You need ₹50 lakhs in 15 years for your child's education. How much to invest today at 10% CAGR?
• Target (ending value) = ₹50,00,000
• Expected CAGR = 10% p.a.
• Time period = 15 years
Starting value = ₹50,00,000 / (1 + 0.10)^15
Starting value = ₹50,00,000 / (1.10)^15
Starting value = ₹50,00,000 / 4.1772 = ₹11,96,928
Invest ₹11.97 lakhs today to reach ₹50 lakhs in 15 years at 10% CAGR.
Common Mistakes to Avoid
Confusing CAGR with absolute return
If your ₹1L investment grows to ₹2L in 5 years, the absolute return is 100%, but CAGR is 14.87%. CAGR annualizes the growth so you can compare a 5-year investment with a 10-year one fairly. Always compare mutual funds using CAGR, not absolute return, when tenures differ.
Using CAGR to predict future returns
A fund showing 15% CAGR over 5 years does NOT guarantee 15% next year. CAGR is backward-looking (historical performance). Markets fluctuate - a fund may give 25% one year and -5% another, averaging to 15% CAGR. Use CAGR to evaluate past performance, not to project the future.
Comparing SIP returns using CAGR
CAGR works for lump sum investments. For SIPs (monthly investments), use XIRR (Extended Internal Rate of Return) which accounts for staggered investments. A SIP's CAGR calculated naively will be wrong. Most mutual fund platforms show XIRR for SIPs - use that, not CAGR.
Ignoring the impact of tenure
A fund with 20% CAGR over 2 years is less reliable than one with 12% CAGR over 10 years. Short-term CAGR can be inflated by lucky timing. For equity investments, evaluate CAGR over at least 5-7 years to see performance across market cycles. Longer track records are more meaningful.
Not accounting for taxes and fees
Published CAGR figures from AMCs or portals are pre-tax and usually include fund expenses but not your capital gains tax. If a fund shows 15% CAGR but you pay 12.5% LTCG tax on gains, your effective CAGR is lower. Always calculate post-tax returns for real comparison.
Cherry-picking start and end dates
CAGR is very sensitive to start/end dates. Calculating from a market bottom (Mar 2020) to a peak (Jan 2022) inflates CAGR. Calculating from peak to trough deflates it. When evaluating funds, use fixed periods (3/5/10 years from today) or rolling returns to avoid date bias.
Using CAGR for volatile instruments
CAGR smooths out volatility, which can be misleading. A fund that grew ₹1L to ₹3L in 5 years has the same CAGR whether it grew steadily or crashed 50% in year 3 then recovered. Check standard deviation or drawdown alongside CAGR to understand risk.
Comparing CAGR across different asset classes
Gold with 8% CAGR and a debt fund with 7% CAGR seem similar, but gold has no income tax on LTCG up to certain limits, while debt funds are taxed as per slab. PPF at 7.1% CAGR is tax-free. Always compare post-tax, inflation-adjusted returns for apples-to-apples comparison.
Updated: October 2026
Example returns: Historical data shows Nifty 50 ~12%, large-cap mutual funds ~11-13%, mid-cap funds ~14-16%, gold ~8%, PPF/FD ~7% (pre-tax) over the last 10 years. These are examples only - actual returns vary by period and investment.
Note: CAGR is a historical measure. Past performance is not indicative of future results. Use it alongside risk metrics and investment goals.
What is CAGR?
CAGR (Compound Annual Growth Rate) is the year-over-year growth rate of an investment, assuming profits are reinvested. It is widely used in India to compare mutual funds, stocks, and business growth on an apples-to-apples basis.
CAGR Formula Explained
CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1Where:
- Ending Value = Final value of the investment (e.g., current NAV × units)
- Beginning Value = Initial investment amount
- Years = Time period (can include fractions, e.g., 5.5 years)
How to interpret: If your investment shows 12% CAGR over 5 years, it means your money grew at an average rate of 12% per year, compounded. It does NOT mean you got exactly 12% each year - actual year-by-year returns may vary widely.
Related formulas:
Calculate Future Value:
Future Value = Starting Value × (1 + CAGR)^YearsCalculate Required Starting Amount:
Starting Value = Target Value / (1 + CAGR)^YearsCAGR vs XIRR: Use CAGR for lump sum investments where all money is invested on day one. Use XIRR for SIPs or any investment where money is added or withdrawn at different times. XIRR accounts for timing and amount of each cash flow, making it more accurate for SIPs.
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Frequently Asked Questions
What is CAGR?
CAGR (Compound Annual Growth Rate) is the constant annual rate at which an investment would have grown if it compounded once a year. It is used to compare mutual funds, stocks, and businesses over different time periods on an apples-to-apples basis.
How is CAGR calculated?
CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1. For example, ₹1 lakh growing to ₹2 lakh in 5 years has a CAGR of about 14.87%. It smooths out year-to-year volatility to give an average annual growth rate.
Is CAGR the same as absolute return?
No. Absolute return is the total percentage gain over the full period. CAGR annualizes that growth so you can compare 3-year and 10-year investments fairly. For example, 100% return in 5 years is 14.87% CAGR, not 20% per year.
Can CAGR predict future returns?
No. CAGR is a historical measure that shows past performance. A fund with 15% CAGR over the last 5 years does NOT guarantee 15% returns in the future. Markets fluctuate - use CAGR to evaluate past performance alongside risk metrics, not to project future returns.
Should I use CAGR or XIRR for SIPs?
Use XIRR (Extended Internal Rate of Return) for SIPs and any investment where money is added or withdrawn at different times. CAGR works only for lump sum investments where all money is invested on day one. XIRR accounts for timing and amount of each cash flow, making it accurate for SIPs.
What is a good CAGR for investments in India?
Historical examples from the last 10 years: Nifty 50 ~12%, large-cap mutual funds ~11-13%, mid-cap funds ~14-16%, gold ~8%, PPF/FD ~7% (pre-tax). These are illustrative only - actual returns vary by time period and specific investment. Good CAGR depends on asset class and risk taken. Always compare within the same category and tenure.
How long a CAGR period should I check?
For equity investments, evaluate CAGR over at least 5-7 years to see performance across market cycles. Short-term CAGR (1-2 years) can be inflated by lucky timing. Longer track records (10+ years) are more meaningful but fewer funds have such history.
Does CAGR account for taxes and fees?
No. Published CAGR figures from AMCs are pre-tax and include fund expenses but not your capital gains tax. If a fund shows 15% CAGR but you pay 12.5% LTCG tax on gains, your effective post-tax CAGR is lower. Always calculate post-tax returns for real comparison.